80 FR 49286 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify NASDAQ Rule 7051 Fees Relating to Pricing for Direct Circuit Connections

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 158 (August 17, 2015)

[Federal Register Volume 80, Number 158 (Monday, August 17, 2015)]
[Notices]
[Pages 49286-49287]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-20155]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75661; File No. SR-NASDAQ-2015-094]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify NASDAQ Rule 7051 Fees Relating to Pricing for Direct Circuit 
Connections

August 11, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 5, 2015, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II and 
III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    NASDAQ is proposing to amend Rule 7051 to extend the waiver of 
installation fees assessed for Direct Circuit Connection to NASDAQ, and 
to waive ongoing monthly fees for direct connectivity to the Chicago, 
IL data center, for a limited time.
    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com, at NASDAQ's principal office, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASDAQ included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of those statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ is proposing to amend Rule 7051 entitled ``Direct 
Connectivity to Nasdaq'' to extend the waiver of installation fees for 
Direct Circuit Connection to Nasdaq (10Gb), Direct Circuit Connection 
to Nasdaq (supports up to 1Gb), and Direct Circuit Connection to Nasdaq 
(1Gb Ultra). The Exchange is also proposing to waive the related 
ongoing monthly fees assessed for these direct connectivity options to 
the Exchange's new Chicago, IL data center.\3\ The Direct Circuit 
Connection options under Rule 7051 provide market participants with 
three optional means by which they may connect to NASDAQ.\4\ The three 
Direct Circuit Connections are differentiated by the total capacity of 
the fiber connection (represented in Gigabytes or ``Gb'') and the type 
of switch used. A switch is a type of network hardware that acts as the 
``gatekeeper'' for all clients' orders sent to the System \5\ and 
orders them in sequence for entry into the System for execution. The 
1Gb ``Ultra'' fiber connection offering uses lower latency \6\ switches 
than the 1Gb fiber connection offering.\7\
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    \3\ Direct connectivity is offered through data centers in 
Carteret, NJ, Secaucus, NJ, Ashburn, VA, and Chicago, IL.
    \4\ The Exchange notes that there are several additional means 
by which market participants may connect to the Exchange, such as 
through the colocation facility or third parties.
    \5\ As defined in Rule 4701(a).
    \6\ The term ``latency'' for the purposes of this rule filing 
means a measure of the time it takes for an order to enter into a 
switch and then exit for entry into the System.
    \7\ Each of NASDAQ's connection offerings use different 
switches, but the switches are of uniform type within each offering 
(i.e., all 1G connectivity options currently use the same switches). 
As a consequence, all client subscribers to a particular 
connectivity option receive the same latency in terms of the 
capabilities of their switches.
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    The Exchange assesses separate installation and ongoing monthly 
fees for subscription to each option. For 1Gb connectivity, the 
Exchange assesses an installation fee of $1,500 and ongoing monthly 
fees of $2,500. For 10Gb connectivity, the Exchange charges an 
installation fee of $1,500 and ongoing monthly fees of $7,500. For 1Gb 
Ultra, the Exchange charges an installation fee of $1,500 and ongoing 
monthly fees of $2,500.
    NASDAQ is relocating its Disaster Recovery (``DR'') location for 
the U.S. equities and options markets from Ashburn, VA to its new 
Chicago, IL data center beginning in August 2015 with completion of the 
move expected on November 9, 2015. NASDAQ has invested and installed 
new equipment in this data center for client connectivity and for the 
infrastructure of Exchange systems. NASDAQ has chosen Chicago as the 
location of its new DR data center as many other exchanges are using 
this same location for a DR or primary location and, as a result, many 
of our market participants have a presence or connection at this 
location, thus making it easier and less expensive for many market 
participants to connect to NASDAQ's DR location. In anticipation of the 
move and to facilitate transfer of connectivity from Ashburn, VA to 
Chicago, IL, the Exchange waived the installation fees for the months 
of April through July, 2015, for all three connectivity options so that 
both new subscriptions and customers transferring from one connectivity 
option to another during that time would not be assessed the 
installation fee.\8\ The Exchange notes that the waiver allows members 
to move from one offering to another, or to move the location of their 
connectivity from one direct connectivity access point to another, with 
no penalty in the form of an installation fee. The Exchange is 
proposing to extend the waiver through November 9, 2015. To further 
facilitate use of the upgraded facility, the Exchange is also proposing 
to waive ongoing monthly fees for all three Direct Circuit Connectivity 
options for connectivity to the Chicago, IL data center. Waiver of the 
ongoing monthly fees will provide incentive to market participants to 
move their DR connectivity to Chicago, IL and test this connectivity 
prior to completion of the transfer of the DR functionality, and will 
also allow market participants that wish to connect to the Chicago, IL 
data center to do so smoothly with no penalty in the form of 
overlapping monthly direct connectivity fees.
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    \8\ See Securities Exchange Act Release No. 74680 (April 8, 
2015), 80 FR 20035 (April 14, 2015) (SR-NASDAQ-2015-029).
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2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\9\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\10\ in particular, in that it 
provides for the equitable allocation

[[Page 49287]]

of reasonable dues, fees and other charges among members and issuers 
and other persons using any facility or system which NASDAQ operates or 
controls and is designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest; 
and are not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that extending the waiver of Direct Circuit 
Connectivity installation fees is reasonable because it will continue 
to enable market participants to move from one direct connectivity 
offering to another, or to move the location of their connectivity from 
one direct connectivity access point to another, with no penalty in the 
form of an installation fee. Similarly, the Exchange believes that the 
time-limited waiver of ongoing monthly fees for connectivity to the 
Chicago, IL data center is reasonable because the Exchange is moving 
its DR location from Ashburn, VA to Chicago, IL, which is expected to 
be completed on November 9, 2015. As such, to continue DR connectivity, 
market participants must subscribe to new Direct Circuit Connectivity 
to the Chicago, IL data center and test such connectivity prior to 
cancellation of their existing Ashburn, VA direct connectivity 
subscription. The Exchange believes that the proposed fee waivers are 
equitable and do not unfairly discriminate because they are of limited 
duration and designed to apply to market participants that wish to 
utilize the new direct connectivity location and/or are affected by the 
Exchange's determination to move trading and DR functionality from the 
Ashburn, VA data center. Moreover, the Exchange notes that the 
installation fee waiver applies to all three Direct Circuit 
Connectivity options, and therefore it believes that extension of the 
waiver is equitable and does not unfairly discriminate. Waiver of the 
installation fee will allow any market participant that wishes to move 
from their [sic] existing Direct Circuit Connectivity data center to 
the new Chicago, IL data center with no penalty. Waiver of the ongoing 
monthly fees for connectivity to Chicago, IL enables market 
participants to test the DR functionality in Chicago while still being 
connected to the Ashburn, VA location with no penalty in the form of 
overlapping monthly direct connectivity fees.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.\11\ 
The Exchange believes that the proposed fee waivers are pro-competitive 
because they facilitate use of a new, upgraded data center, which will 
improve market resiliency and provide additional connectivity options 
to market participants. To the extent that the new data center makes 
NASDAQ more attractive to market participants over other exchanges and 
trading venues, it may provide incentive to such marketplaces to 
improve and add to their data centers, to the benefit of all market 
participants.
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    \11\ 15 U.S.C. 78f(b)(8).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing change has become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and paragraph (f) of Rule 19b-4 \13\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2015-094 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2015-094. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal offices of the Exchange. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-NASDAQ-2015-
094, and should be submitted on or before September 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-20155 Filed 8-14-15; 8:45 am]
 BILLING CODE 8011-01-P